St. Louis Office Market Highlights:
- Quarterly absorption totaled 160,764 square feet. Clayton and West County buoyed the market with 294,176 square feet of absorption.
- The suburbs continue to carry the region. Class A asking rates in the suburbs are 29.7 percent higher than the CBD.
- Healthcare and financial services firms are driving future activity, the two industries account for 30.0 percent of tenants in the market.
The local economy continues to move full steam ahead. Unemployment is the lowest since the dot-com era, and office employment has been at record levels for several months. The office market is no different.
As expected, the market gained in Q2. Absorption topped 160,000 square feet as Clayton and West County added almost 300,000 square feet. Centene continues to grow at an exponential rate, occupying more than 125,000 square feet in Clayton this quarter and leasing all of 12443 Olive Boulevard (104,000 square feet) in West County. The building was set to become vacant later this year. Over the last two years, Centene has leased over 500,000 square feet in Clayton and West County, all of it as expansions. Due to Centene, large blocks of space are hard to come by in the two submarkets. Class A vacancy is just 4.3 percent in Clayton and 7.4 percent in West County. If you are a tenant looking in either market for 25,000 square feet, there are only four options available, none in Clayton.
Meanwhile, nine Class A buildings in the CBD can accommodate that size requirement. The CBD remains a tenant’s market as vacancy rates are double what they are in the suburbs.
With a lack of new buildings hitting the market anytime soon, larger tenants looking for space in the next 24 months are having to cast a wider net for alternative locations. There could be some relief in sight with acquisitions of Scottrade and Isle of Capri. Scottrade has a large real estate footprint that could shrink, and Isle of Capri’s space is being marketed for sublease.